Black Monday: 20 years on, could it happen again?

Veteranmarket watchersstill shudder when they recall thecrash of Oct. 19, 1987 — a day that came to be known as Black Monday.

Back in 1987, veteran money manager Ross Healy was working atM.K. Wong and Associates in Vancouver.

As he went to work that day,Asian and European markets were already starting to unravel."Of course, we had no inkling just how incredibly serious it was going to get."

Twenty years ago, market veteran Fred Ketchen was on the trading deskat Scotia McLeod in Toronto.

"We were ready for a selloff," he told CBC News. "I'm not sure that we were ready for the selloff to the extent that it happened."

By the end of Black Monday,the Dow Jones industrial average had plunged 508 points — 22.6 per cent — still the biggest one-day percentage drop inhistory.

In Toronto, the benchmark index — then the TSE 300 composite index — lost 407 points, or about 11 per cent.

"At the end of the day … I was terrified," Healy told CBCNews.ca."What happens if it keeps going?" he recalls thinking at the time. "In other words, whatif this is the beginning?"

It turned out not to bethe start of something worse;the markets soon resumed their upward path. A look back at trading charts of North Americanmarkets makes the 1987 crash look like a minor blip.

But people have been wondering if a drop that severecould happen again. Somepointtosimilaritiesbetween the current state of the stockmarketsand the situation 20 years ago.

For instance, stock markets back then were near all-time highs following a five-year bull market, just like they are today.

'Market stretched' in '87: money manager

But Ross Healy thinks there are important differences this time.

"I don't get the same sense that there's anything impending [in the stock markets]," he said."In 1987, the market was really stretched in terms of value."

The biggestmarket risk these days, Healy thinks, comes not from the stock markets, but from the currency markets —especially aroundthe U.S. dollar.

"It could get really ugly down there, because as we measure the U.S. as a country, they're insolvent," he said.

Ketchen also points tomore controls in the markets now,referring torestrictions that have since been brought in to restrict computer program trading. Now, there are also "circuit breakers" that kick in to stop trading oncelosses reach a certain point.

But there's little built intothe system topreventsevere downturns that may play out over a long period of time.

For instance, the five-month market slump between April 1998 and August 1998 took the market 27 per cent lower, and the dot-com meltdown that began in 2000took two years to slash 40 per cent from the value of the Toronto market and over 70 per cent from the Nasdaq.